Why Sun Life Financial Inc. Is Rallying Over 3%

Sun Life Financial Inc. (TSX:SLF)(NYSE:SLF), one of the world’s largest insurance companies, released its fiscal 2017 fourth-quarter and full-year earnings results after the market closed yesterday, and its stock has responded by rallying over 3% at the open of trading today. Let’s break down the earnings results and the fundamentals of its stock to determine if we should be long-term buyers. Breaking it all down Here’s a breakdown of eight of the most notable statistics from Sun Life’s three-month period ended December 31, 2017, compared with the same period in 2016: Metric Q4 2017 Q4 2016 Change Insurance sales…

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Sun Life Financial Inc.(TSX:SLF)(NYSE:SLF), one of the world’s largest insurance companies, released its fiscal 2017 fourth-quarter and full-year earnings results after the market closed yesterday, and its stock has responded by rallying over 3% at the open of trading today. Let’s break down the earnings results and the fundamentals of its stock to determine if we should be long-term buyers.

Breaking it all down

Here’s a breakdown of eight of the most notable statistics from Sun Life’s three-month period ended December 31, 2017, compared with the same period in 2016:

Metric

Q4 2017

Q4 2016

Change

Insurance sales

$1,106 million

$1,071 million

3.3%

Wealth sales

$35,300 million

$37,250 million

(5.2%)

Adjusted premiums and deposits

$43,420 million

$43,117 million

0.7%

Total revenue

$8,648 million

$2,366 million

265.5%

Underlying net income

$641 million

$560 million

14.5%

Underlying earnings per share (EPS)

$1.05

$0.91

15.4%

Underlying return on equity (ROE)

12.7%

11.4%

130-basis-point improvement

Book value per common share

$32.86

$32.10

2.4%

And here’s a breakdown of 10 notable statistics from its 12-month period ended December 31, 2017, compared with the same period in 2016:

Metric

Fiscal 2017

Fiscal 2016

Change

Insurance sales

$3,042 million

$2,758 million

10.3%

Wealth sales

$145,314 million

$138,319 million

5.1%

Adjusted premiums and deposits

$170,534 million

$161,217 million

5.8%

Total revenue

$29,334 billion

$28,573 billion

2.7%

Underlying net income

$2,546 million

$2,335 million

9.0%

Underlying EPS

$4.15

$3.80

9.2%

Underlying ROE

12.7%

12.2%

50-basis-point improvement

Total assets under management

$974,785 million

$903,275 million

7.9%

Book value per common share

$32.86

$32.10

2.4%

Dividends per common share

$1.745

$1.62

7.7%

What should you do with Sun Life’s stock today?

It was a great quarter overall for Sun Life, and it capped off a fantastic year for the company, so I think the +3% pop in its stock is warranted; furthermore, I think the stock represents a very attractive long-term investment opportunity today for two fundamental reasons in particular.

First, it’s still undervalued. Sun Life’s stock currently trades at just 12.9 times fiscal 2017’s underlying EPS of $4.15 and only 11.7 times the consensus estimate of $4.57 for fiscal 2018, both of which are very inexpensive given its current earnings-growth rate and its estimated 8.2% long-term earnings-growth rate; these multiples are also inexpensive compared with its five-year average multiple of 15.4.

Second, it has a high dividend with a track record of growth. Sun Life currently pays a quarterly dividend of $0.455 per share, equating to $1.82 per share annually, which gives it a rich 3.4% yield. Investors must also note that the company’s 4.6% dividend hike in November has it on track for 2018 to mark the fourth straight year in which it has raised its annual dividend payment, and I think its strong growth of underlying net income will allow this streak to continue for many years to come.

With all of the information provided above in mind, I think all Foolish investors should strongly consider beginning to scale in to positions in Sun Life over the next couple of trading sessions.

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Fool contributor Joseph Solitro has no position in any stocks mentioned.

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